Energy efficiency and the pitch to consumers

Will motivator be price, rewards or community?

Three items crossed my radar yesterday, each worthy of note. Particularly as they came a day after we reported on the expansion of a dynamic pricing pilot in Illinois, where motivation has been based on price elasticity.

The front page of the online The New York Times offered two items, which may be examined as a reflection of mainstream media coverage of power industry issues. It's important to understand how those issues are presented to the public.

The article notes the earnest use of social media by utilities, with the meager results a wallflower might expect. (Nobody is hanging out on their utility's Facebook page, though that could change with incentives. iTunes credits for EE actions, anyone?) Utilities are using games and data analysis to get the EE mantra across in a summer marked by record high temperatures across the country. Having succeeded at playing wallflower with cheap rates for so long, how does a utility inspire customers to cut their use just when they need air conditioning?

If electricity bills account for about 2 percent of household income and "energy savings" might cut that amount by 10 percent, you've got a real yawner, the article suggests. OPower's co-founder Alex Laskey is quoted: electricity is boring and cheap.

The article identifies consumer behavior as the lynchpin for energy efficiency efforts. Further, it explores how emotional factors apply to behavioral change. So far, so good.

Programs that compare a customer's energy use to his/her own history as well as neighbors or the power of a community-wide effort are cited in the article. It does not mention the notion of collective environmental stewardship as a motivator—that incremental actions in aggregate have greater value to society than the individual—though I suspect that's going to be one of the most powerful drivers of energy efficiency in the United States.

The notion of making do with what you need, rather than wallowing in excess and its attendant waste, will come slowly to what is, historically, an adolescent nation once blessed with abundant, if non-renewable or slow-to-renew natural resources. Freeze in the dark? No one has ever suggested that infantile canard.

Despite the noise created by Astroturf organizations (i.e., faux grassroots) sponsored by fossil fuel interests and their unwitting stooges, common sense measures such as turning up one's thermostat by a few degrees to avoid the siting and capital expense of costly, polluting peaker plants or involuntary brownouts isn't a bad trade. Yet I'd venture that a message such as "cut your peak use or else you'll face rotating brownouts!" won't go far. That's where positive motivations for consumer behavioral change comes in. Yet, I'd predict that if not coupled with transparency, good efforts won't go far.

What's interesting about the current zeitgeist is the degree to which collective action has been disparaged, perhaps due to the supposed taint of institutional involvement. I.e., if the government or your utility is involved, collective action to meet system constraints essentially levied by society is somehow suspect. That's where the "rights come with responsibilities" piece comes into play. It'll be a long haul, folks, but if we don't start now, an economic recovery in, say, five years, is going upend the supply-load equation.

The Times' article adds that small monetary rewards such as discounts at nearby businesses are also being explored by various companies.

Perhaps the persuasive proposal is one that combines, say, a community's goal to achieve X level of energy efficiency with those small retail rewards. Or, with town or city as aggregator, a community's financial shortfall could be met in part by collective action on EE.

In any case, the national media has connected the dots between extreme high temperatures, grid constraints and end-user behavior. That's a foot in the door to the public consciousness that utilities should be (and are) exploiting. But I don't see a unified message.

"Will Drought Cause the Next Blackout?" raises the profile of the long-discussed connection between energy and water. Producing energy requires huge amounts of water. Treating water for human consumption requires energy. Water diverted for power production, particularly in the arid West—whether that's to pull oil and gas out of the ground or to cool a power plant—means less water for agriculture, other industries (in turn, of course, dependent on inexpensive power) and human consumption.

According to the Times' op-ed article:

"About half of the nation's water withdrawals every day are just for cooling power plants. In addition, the oil and gas industries use tens of millions of gallons a day, injecting water into aging oil fields to improve production, and to free natural gas in shale formations through hydraulic fracturing. Those numbers are not large from a national perspective, but they can be significant locally.

"All told, we withdraw more water for the energy sector than for agriculture. Unfortunately, this relationship means that water problems become energy problems that are serious enough to warrant high-level attention."

If we're really thinking in a sustainable, forward-looking, manner, then make that: energy + water + food = one issue. And there's urgency boiling out of these statistics:

"The United States Energy Information Administration recently issued an alert that the drought was likely to exacerbate challenges to California's electric power market this summer, with higher risks of reliability problems and scarcity-driven price increases. In the Midwest, power plants are competing for water that farmers want for their devastated corn crops."

Finally, Ahmad Faruqui, a principal at The Brattle Group—a seemingly ubiquitous presence in pricing discussions—yesterday addressed the National Association of Regulatory Utility Commissioners (NARUC) summer meeting in Portland on the subject of dynamic pricing. That brings us full circle to yesterday's piece on that topic. Faruqui, well-known for his work on price elasticity—at what price spread will consumers take action?—is involved in the Illinois program. But price elasticity as motivator for consumer behavior change is a topic for another day. Trust me, we'll get to it soon.

Comments

Conflicting demands generate...well...conflicts

- Jul 25, 2012 - 7:26 AM

The combined demands of efficiency, CO2 emission reduction, the planned restraint on water withdrawals, agriculture and human consumption are going to create a real conundrum. Carbon Capture technologies decrease the efficiency of powerplants because they consume a large amount of energy which makes the fuel usage/net MWh go up and also the water usage/net MWh go up. Because wind and solar are not dispatchable and, because neither is typically at maximum output when the electrical peak typically hits and, because both are highly variable (wind from unstable velocity and solar due to clouds), they require fast reacting backup power--ie fossil power or energy storage. Since energy storage technology is far from mature and very expensive, fossil power is the typical backup. Due to PTCs, cash grants, and RPSs, wind and solar are enjoying an economic advantage that discourages construction of new fossil plants and/or encourages construction of the least expensive of fossil plants, simple cycle gas turbines which are far less efficient than combined cycle facilities. The result is that backup power for wind and solar tends to be older, less efficient plants that should have been retired but continue to consume large quantities of cooling water or simple cycle turbines which waste fuel.

One thing not mentioned in the article is water reuse. Almost all the articles written about utilitiy water consumption for cooling act like the water just disappears into the bowels of the power plant or into the fracked reservoirs. Plants with cooling towers evaporate a lot of the water used for cooling but it eventually comes back as rain. Once through, open circuit cooling water systems return the water to the ocean, river, or lake from which it was withdrawn or to a different outfall. The water used for producing steam basically gets condensed and keeps going around in the cycle with minimal blowdown and makeup. Human consumption ends up pretty much being put back to the Earth somewhere. The major issues with all the return streams include increased temperature from open circuit systems, chemicals from cooling tower and boiler blowdowns, and chemicals (and possible pathogens) from wastewater treating plants.

Want to use water efficiently, try breaking up the "black" water (sewage) and "gray" water (laundry water, lavatory water, bath water, air conditioner condensate) streams. The gray water is usually just fine for stabilizing the moisture content around home slabs, watering lawns and watering gardens. Properly treat and reuse the water effluent from sewage treatment plants--although one must be very careful with this scenario and this tends to be a subject about which the public is very squeamish.

Fracking water is withdrawn once it does its job downhole. It gets put back into the Earth's hydrological system but needs treatment. One cannot say the same for water-flood though. There are actually technologies to use LPGs for fracking but obviously require a lot of expensive equipment for containment and transport to various well sites.

Thanks for describing the cycles involving water

- Jul 25, 2012 - 10:46 AM

Well articulated description of how water interacts in the power and extraction processes. One could point to many examples in this description where societal value judgments will be made, as cycles on paper have an illusion of efficiency and, therefore, simplicity.

For instance, a power plant that emits steam and therefore "returns the water to the system" is meaningless in the West where that water was extracted from a river or aquifer and there's no meaningful connection between extraction and return. That's essentially a one-way use of a resource.

But your description fleshes out my thesis on the energy-water nexus. Much appreciated.

Underlying Assumptions Limit Our Options

- Jul 25, 2012 - 6:26 AM

When we make our assumptions explicit - examine what we collectively acknowledge as truths - we begin to understand what drives our behavior and see a way through to a new set of options. Consider just a few base assumptions we have that may change over the coming years.

1. Using massive amounts of water to make energy is a rational use of a precious resource.

2. Electricity is a commodity that should cost as little as possible.

3. The utility must measure how much we each consume so that it can bill us fairly.

4. I am entitled to the personal comfort that electricity provides me.

I could go on, but I'll stop there. These assumptions each support fundamental aspects of our current utility business model, but they also limit the way we think about future problems and solutiions.

1. We have to have fossil fuel energy (massive water consumption for energy) to meet our needs for a long way into the future, so there is little we can do about that. However, we could shift our focus to those needs and look to substitutes to find new paths. Adding the opportunity cost of water to reflect the true cost of fossil fuel energy would steadily drive adoption of technology-based energy like rooftop solar, based on alternative assumptions.

2. Electricity became a commodity over time, but it started out as a luxury good in Edison's original vision of lighting districts for businesses. Paradoxically, electricity now drives most of the essentials of our lives, but we resist paying any more for it than we have to. If sold as a value added service, electricity would command a much higher price, and more revenue would open the door to a plethora of new options. I pay over $200/month for cell phones for my family of four, but less than $150/month for electricity. If I ask myself which I would drop first, the answer is obvious. We should think of new energy service models delivered by any number of market participants in any number of ways to provide more value and secure our electricity provisioning system.

3. So much money spent on measuring and billing individual accounts under our current utility system, even with revenue amounts that are acknowledged to be a relatively small piece of our household budgets. Imagine for a moment if electricity were billed collectively to all recipients on a distribution feeder - maybe this could be tried with smaller utilities - with the alternative of collectively managing that precious resource - perhaps like garbage pickup. This one is a little far out, I admit. But community incentives - even competitions between communities - are neutered when each individual household in the community feels justified in optimizing their consumption for their own purposes, with little regard for their impact on the system as a whole, and then we pursue pricing mechanisms that have little chance of impacting behavior because the commodity is so cheap already.

4. When one's personal comfort is totally based on one's relationship with a thermostat on the wall - chilling the entire home, instead of cooling a portion of the house, or moving air with fans, or dressing lighter, or learning to live a little warmer - one has optimized their own situation over that of the community. Some will continue in this manner regardless, no doubt, for health or personal reasons, but others will bend their behavior to the goals of the community if they understand the urgency of the situation and the value of the proposed behavior change. It's a matter of shifting attitudes about what is important.

I guess for me it boils down to why we are here - to optimize our own situation or to act collectively to optimize society's prospects. Right now, our utility model is set up to favor the individual over the community. Until we begin to shift that perspective, we will face a more limited set of options.

Mr. Cooper, at NexWatt it

- Jul 26, 2012 - 5:34 AM

Mr. Cooper, at NexWatt it appears your entire professional life is built around selling a certain viewpoint to others. Is that somehow less obsessive than when "one's personal comfort is totally based on one's relationship with a thermostat on the wall"? I remind you, it wasn't an interest of anybody until people in Boulder and others started talking about how it should be set. These people seem to spend an inordinate amount of time worrying about how I set my thermostat. My life does not revolve around my thermostat, and I'm sure you have interests outside of NextWatt. Let's just say that neither of us knows the other, so neither of us can really make assumptions about the other.

However, when you talk about how "others will bend their behavior to the goals of the community if they understand the urgency of the situation and the value of the proposed behavior change", well, that's *exactly* what I am talking about. The Puritans probably said the same thing.

In short, dynamic pricing

Great forward thinking. Thanks for walking the plank to the deep end of imagination; that's not pejorative, I think you're on to several major changes we'll see in our lifetimes.

One quick way to get to the upshot of several of your points is dynamic pricing. Let those who wish to use the most expensive electricity pay for it and the rest of us who can or already have adjusted stop subsidizing the energy hogs.

And let's all set aside the canard that as Americans we're entitled to whatever we can pay for. Democratize the provision of energy and reward intiative and discipline. In reality, a lot of that use--whatever-I-can-pay-for ethos equates to huge amounts of waste. That's gluttony at great cost to natural resources and, traditionally, that has not been a societally favored trait. Let it apply to personal consumption of energy. Pay to play!

The tyranny of "reasonableness"

- Jul 25, 2012 - 5:58 AM

The idea that there is only one way to live your life and that if you don't meet the norms you should be "shamed" is a dangerous one. It's literally puritanical.

For example, you talk about comparing someone's energy use your neighbors. I hope you don't mean actually identifying each household's energy use by name to their neighbors. But even if you don't, each household has different needs. For example, retirees and people working out of their homes are more likely to be at home the whole day and thus run their A/C more in the summer. Is this somehow wrong? Yet comparing their power use to a neighborhood that is at work most of the day falsely gives the impression that these people don't care about the environment.

Most people have different temperature thresholds. It's not a linear response. A change from 74 degrees to 76 degrees may mean nothing to one person, but be very uncomfortable to someone else. Anybody who's ever worked in an office knows about thermostat wars. Yet in my community (Boulder, CO) there are people who do indeed think they know what is the "right" temperature for everybody. Back when we were to become the nation's first "Smart Grid City" where the electric utility (and the city) would know what each of us set our thermostat at, some people here talked about the "best" temperature for everyone. It's around 78 or 80 degrees.

Now, any one of these changes may seem quite minor and reasonable. Why can't you set your thermostat higher a couple of degrees higher, or buy an energy efficient car that's a bit smaller than you'd like, or put up with the harsh light of CFCs, or sort your trash, or just use canvas bags instead of plastic at the grocery store? There's a very good case for each of these. But if you get under social pressure to make ALL these changes, pretty soon you're not living your life, but someone else's.

It's far better to use price incentives to let each person sort out what works best for him or her than it is to try and force each person to meet some norm of "reasonableness" set by someone else, and shaming them if they don't. It's the carrot versus the stick. By letting people feel they have some choice in what they do, you'll find that people are more likely to make changes.

Easy does it

- Jul 25, 2012 - 10:12 AM

Milton,

You and I wholeheartedly agree that enabling individual choice is fundamental to real motivation. We already know that some folks react negatively to comparisons with their neighbors; a response I can relate to. We all have activities that could cause our use to spike or trade-offs we're willing to make that differ from the Joneses.

You use words, however, such as "tyranny" and "shame" and "dangerous." That's hyperbole, in relation to the actual situations being described.

First off, let's remember that these programs are voluntary. Secondly, no personally identifiable data is being used in the peer comparison example. Third, there's nothing coercive about any of this -- the customer decides whether it's meaningful and relevant. Finally, the peer comparison example is most relevant with the more detail a resident decides to share. If you share the # of occupants, their age and occupation, you'd get the most accurate comparison.

However, let's not make the peer comparison example a straw man that raises the specter of political correctness and "tyranny." There are many approaches and we've only just begun to apply principles of behavioral motivation to achieve an end result. Other approaches are in the market and, in fact, are being tested across the country.

However, as societal values shift, if you take smoking for an example, there does develop a societal ethos for positive values and against harmful practices. You see how that's come about with littering, smoking, driving Humvees, etc.

So we agree that making any of this mandatory and coercive is odious. I don't see that happening, particularly as utilities only need a slice of their customers to engage in EE and peak load reduction to achieve capital deferment and other benefits.

Phil, you seem like a very

- Jul 26, 2012 - 5:34 AM

Phil, you seem like a very reasonable person. But I live in Boulder, and I've seen many of these things happen. Most of the examples I gave are mandatory, either through federal or Boulder city law. About the only examples that are not are plastic bags (soon to be eliminated by the city council) and the setting of the thermostat, which it's clear Boulder would do if they had the technology. None of that is voluntary. Boulder may be an extreme place, but it's the same in other cities such as San Francisco and Portland, OR.

As for societal values shifting, the examples you gave take decades to change. I can tell you that even living in Boulder I still see plenty of litter, and while the number of Priuses might be more than other cities, the percentage of SUVs and other large vehicles is no lower.

Thanks Milton

- Jul 26, 2012 - 4:08 PM

Thanks for making me smile!

I don't believe the following sentence has ever been written before: "Phil, you seem like a very reasonable person."(!)

And I get it when you follow up with: "But I live in Boulder ..." Trust me, I'm up there with some frequency, but I had no idea that certain levels of energy use were mandated or taxed accordingly. No wonder I live in Littleton!

That makes Boulder's exploration of a municipal utility even more dicey for residents. I guess that some communities/utilities would be gambling (in my view) by mandating what ordinarily would be opt-in programs.

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